Mumbai: BNP Paribas, France''s biggest listed bank and one of Europe''s largest banks, has frozen three of its investment funds worth 1.6 billion euros ($2.2 billion), citing volatility in the US asset-based securities market.

BNP said the funds'' exposure to risky subprime loans in the US that have rattled financial markets worldwide means the bank can no longer calculate their net value.

The frozen funds, however, account for less than 0.5 per cent of funds under management for the eurozone''s second biggest bank by value.

But the bank is expected to have frozen a separate European fund valued at 750 million euros, while a Dutch bank is reported to have pulled its planned new listing after suffering subprime losses.

The developments came after Germany''s Bundesbank called a meeting of those involved in the rescue of Europe''s highest profile subprime victim, IKB, and the European Central Bank said it stood ready to act if needed to ensure smooth functioning of markets.

"The complete evaporation of liquidity in certain market segments of the US securitisation market has made it impossible to value certain assets fairly, regardless of their quality or credit rating," BNP said in a statement.

"BNP Paribas Investment Partners has decided to temporarily suspend the calculation of the net asset value as well as subscriptions/redemptions, in strict compliance with regulations, for these funds," it said, adding "Valuation of the funds would resume as soon as liquidity returned to the market and, in the continued absence of liquidity, additional information on the envisaged measures would be given to investors within a month."

The funds affected were Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia funds, BNP Paribas Investment Partners said.

The three funds had declined rapidly in size in the past few weeks to 1.593 billion euros ($2.19 billion) at August 7, down from 2.075 billion at July 27. The bank has 326 billion euros of assets under management, BNP Paribas said.

Most of the decline was due to investors pulling out of the funds, said Alain Papiasse, head of asset management and services at BNP Paribas.

BNP Paribas said it was barring investors from redeeming cash from the funds.

The ECB, meanwhile, said it would provide quick liquidity at 4.00 per cent to bring some calm to money markets.

Subprime mortgages are the riskiest property loans, often extended to people with payment difficulties or a bad credit history.

Several major US firms have announced losses from exposure to these loans, causing a widespread fall in stock markets.

Traders said that the BNP Paribas statement had helped cause a drop in European stock markets.

Euro-zone government bond futures rallied on the news as stock markets slipped and European credit markets gave up their early gains.

German bank Sal.Oppenheim said it had temporarily closed a 750 million-euro asset-backed securities fund it managed for Austrian investment foundation Hypo KAG, and Dutch merchant bank NIBC cancelled a flotation plan after revealing a 137 million euro loss in losses on US asset-backed securities.

Other major financial services companies, however, said there was no undue cause for concern over current market conditions.